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Private and Public sector leaders and their impact on the economy’s recovery (new study)

Posted by Francis O' Toole on November 20, 2012

New study shows that the different management styles in the Public and Private Sectors are having a big impact on Ireland’s economy.

A recent study conducted by Hudson, a global recruitment and talent management firm, has shown that the key differences between public sector and private sector leaders are having a huge impact on Ireland’s economic recovery. These differences include long term strategic plans adopted by the public sector versus short term plans adopted by their private sector counterparts.

The two sectors have already had high profile disagreements in Ireland regarding pay cuts and other measures to improve the economic situation. According to Hudson’s report, this is likely down to the fact that private sector leaders have a tendency to go for short term results and take immediate, calculated risks hence the large number of pay cuts and redundancies. In the public sector, leaders tend to opt for a long term approach with more thoughtful and less risky tactics which goes some way in explaining strong opposition to pay and job cuts.

The reasons for these differences have been clearly outlined in the report and point to the typical working environment in which these leaders have to operate in. Leaders in the private sector are under a constant pressure from the stock market to constantly improve results and increase benefits while in the public sector, they are guided by a huge number of rules and regulations and are constantly involved in supporting political authorities in policy making. The former often have clear and measurable objectives and are judged on the outcome they produce, the latter often have unclear objectives and are constantly confronted with a range of stakeholders and pressure groups, ready to condemn every mistake or failure.

In addition, the study also showed that in the private sector over 30% of the senior leaders are younger than forty, while in the public sector barely 10% is younger than forty. It also highlighted that differences occur around rule-following and use of authority mainly down to organisational structure.

Peter Cosgrove, Country Manager of Hudson Ireland, said, “Traditionally, the perception has been that the public sector needs to adopt private Sector practices to improve efficiency. While this has been done to some extent, it is obvious, from this report, that the real issue is to what extent both private sector and public sector senior leaders can learn from each other. If leaders in the private sector took a longer term view to redundancies and jobs, we might see less unemployment in Ireland. Conversely, if public sector leaders took a more proactive or short term approach to cost cutting and reducing the salary bill, we might see more money available in the economy.”

One of the main findings in the study is that the private sector may not be the ultimate benchmark for the leadership style to be used in the public sector. It is down to the individual characteristics of each organisation that will determine what kind of leadership will lead to the best results. To this end, the exchange of senior leaders across both sectors can be extremely useful, especially if both types of leaders want to learn from each other.


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